Business

National Oil Unable To Account For Fuel Worth Ksh2.3 Billion

Cartels stole fuel worth Ksh2.3 billion in 2018 belonging to the National Oil Corporation of Kenya (Nock) thanks to the corporation’s poor record keeping, Auditor General Nancy Gathungu has revealed in new report. Nock was unable to account for 2,280,017 litres of diesel and 230,458 litres of super petrol valued at Ksh2,270,336,000, according to the report.

The audit discovered that Nock rarely undertook daily and monthly stock reconciliation, and did not even schedule vehicles carrying customers’ fuel. “In addition, instances of malpractices identified in the generation and processing of unauthorised credit notes, illegal diversion of product consignments, dispatches not supported by transporter documentation or not delivered to intended sites. In view of the foregoing malpractices and illegal diversion of product consignments, the accuracy of inventories could not be verified.,” the report noted.

Nock hired the services of KPMG limited, Ernest and Young and Geomatrix to audit its books for the period between July 2017 and December 2018, costing Ksh18 million. KPMG pocketed Ksh3,366,000, Ernest and Young Ksh11,398,400 and Geomatrix Ksh4,050,000.

According to Gathungu, the taxpayer might not have gotten value for money for the services offered by the three firms. “The scope of investigations by the three firms is largely similar and run within the same period thereby casting doubt on the value for money,” opined Ms Gathungu. Nock’s current liabilities exceed its current assets by Ksh2.59 billion as at June 2018, putting into jeopardy the operations and existence of the firm. “This current state of affairs, along with other matters set forth in note 18 to the financial statements, indicates that a material uncertainty exists that may cast significant doubt on the corporation’s ability to continue as a going concern,” noted the Auditor General. The Corporation owes banks over Ksh5.3 billion and could face auction if the government does not bail it out.

In April 2020, the Kenya Commercial Bank (KCB) commissioned a liquidity and independent business review (IBR) with the aim of auctioning the fuel marketer. In August, the bank also gave a 30-day warning to Nock demanding to be paid in full all the debt, or institute recovery measures which would include auctioning. The warning expired on September 12, 2020. KCB is seeking to recover a debt of Ksh3.67 billion which has accumulated an interest of Ksh147.94 million as of August 31. “In a letter dated August 13, 2020, a week before receiving the final draft IBR (Independent Business Review) report, the Bank issued a demand for full settlement of the loans in 30 days.

This is a real threat and should nothing be done by the shareholder, then Nock may be wound up,” said Nock managing director Leparan Gideon Morintat. The management wants a capital injection of Ksh3 billion from the shareholders in a bid to save it from liquidation. According to Morintat, Nock has not received its budgetary allocation and grants from the government for the first quarter of the current financial year, and also has not been able to access previous grants amounting to Ksh745 million held in a fixed deposit account at KCB.

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